In casual conversation with those who are interested in China’s craft beer market, it doesn’t take long before mention of China’s 1.4 billion population is made. One can take this as a pat euphemism for seeing the country as a lucrative business opportunity. It can also belie an ignorance that views the country as a monolith.
To attempt exporting on this basis alone would be to court failure. Not all of America is the same. Not all Americans are alike. The same is true of China. Sure there is a lot of capita, but what capita, where?
Follow the Money
Realistically, children, the elderly, and those with little disposable income have very low prospects of becoming craft beer consumers, especially of expensive imports. The noveau riche, on the other hand, easily have the means to afford craft beer, but prefer the higher status of wine and luxury spirits, such as cognac and Scotch. That leaves the emerging middle class for whom craft beer is an affordable luxury.
Where are these prospective customers? Simply look to where craft beer is currently most popular in China – the first-tier cities of the east coast in particular, where China’s meteoric export development began. Of course, this is not news to Belgian or German breweries.
Paulaner was way ahead of its time when it opened in Beijing in 1992. Now their Bräuhauses and restaurants can be found in 23 cities. In 2010, I discovered the likes of Chimay and Duvel in Beijing’s trendy new beer bars. Today, Belgians constitute a disproportionate amount of the offerings found in China’s craft beer bottle shops.
Eight years on, not only is there a wave of Chinese homebrewers starting nano-breweries or brewpubs, like Blue Whale in Xinxiang or Cheer Bar in Dongguan, other foreigners are joining the party. Goose Island opened a brewpub in Shanghai last May. Hitachino Nest and Little Creatures have opened taprooms in Shanghai, with Stone to join them this year. Brewdog and Schubros have announced they will establish breweries in China. Many more brands are being imported into China, legitimately or via the grey market.
New All Over Again
As I previously wrote in The Dragon and the Beaver, what we’re seeing with the development of the craft beer market in China is not entirely new. While its evolution in North America doesn’t provide us with a crystal ball, there are enough similarities that one need not reinvent the wheel. “Tasting it once is better than being told 100 times,” is as true here as it is there.
On the other hand, the contexts are sufficiently different that one must tailor strategy and tactics to local conditions. For example, given the key role e-commerce and social media play in the behaviour of China’s young craft beer consumers, it’s important to own this direct online channel to your customers. If you are serious about the market, don’t surrender it to a remote agent or ignore it completely.
As I outlined in The Challenges for China’s Craft Beer Revolution, regulatory hurdles are at the heart of the present opportunity for foreign craft brewers. You can be sure, however, the domestic industry is seeking ways to overcome these barriers to growth. As soon as that happens, expect the demand for imports to shrink as Chinese craft beer reaches a sufficient stage of maturity in volume and quality to meet domestic needs.
And what will be considered Chinese craft beer? Multinational corporations didn’t take the growth of craft beer in North America seriously until it was eating their lunch. You can be sure they won’t be repeating that mistake in China. AB InBev has already acquired Kaiba and Boxing Cat Brewery. In February, they opened a state-of-the-art brewery in Wuhan to brew these brands and Goose Island. Will this help or hamper independent craft brewers? It remains to be seen.
You’ve Got a Friend
In 1995, Alex Wong opened San Francisco Brewing Company in Beijing. He thought that if the Hard Rock Cafe and Kentucky Fried Chicken can make it in Beijing, why can’t he? Well, because he didn’t have the same resources needed to change the culture and overcome the hurdles of doing business in China.
Since that time, numerous craft breweries have come and gone. More often than not, it’s because owners or investors are more concerned about making fast money than making excellent beer. Those breweries that have weathered the storm – like Boxing Cat, Master Gao, Great Leap, Slow Boat, Chengdu Harvest, and Bionic – clearly have the opposite focus and are in it for the long-term. Like other craft brewers around the world, they embrace the spirit of co-opetition to advance the community. It’s worth seeking their advice before making a serious commitment to entering the China market.
A good opportunity to do so is at the annual Craft Beer China Conference & Exhibition (CBCE) in Shanghai in May. This is China’s equivalent to the US Craft Brewers Conference and BrewExpo America. Since its inception in 2016, CBCE has grown rapidly. Last year, it attracted 100 exhibitors from 14 countries and 5,388 attendees from 36 countries.
Co-hosted by NürnbergMesse China, The Beer Link, and the China Light Industry Machinery Association, CBCE 2018 will be held from May 16-18 at the Shanghai World Expo Exhibition & Convention Center. The conference covers eight topics over two days. Of particular interest to foreign craft beer exporters will be the seminars on Craft Beer Industry Policy & Trends and Marketing + Channels.
Craft beer industry suppliers and service providers not only can purchase exhibit space, but have an opportunity to educate local brewers and managers by leading seminars on topics, such as Recipe Development & Brewing Technology, Raw Materials, Processing Methods, Brewhouse Technology, and Measurement & Automation. An investment segment also offers breweries the chance to make a pitch or better refine their business plan.
For more information, visit the CBCE website for details about the conference, the exhibition, and booking recommended hotels. As a bonus to attendees, Shanghai Beer Week runs from May 11-20. What better way to make a craft beer trip to Shanghai than combining these two events?